November 11th, 2014
A blog post written by Daniel Ek Taylor Swift is absolutely right: music is art, art has real value, and artists deserve to be paid for it. We started Spotify because we love music and piracy was killing it. So all the talk swirling around lately about how Spotify is making money on the backs of artists upsets me big time. Our whole reason for existence is to help fans find music and help artists connect with fans through a platform that protects them from piracy and pays them for their amazing work. Quincy Jones posted on Facebook that “Spotify is not the enemy; piracy is the enemy”. You know why? Two numbers: Zero and Two Billion. Piracy doesn’t pay artists a penny – nothing, zilch, zero. Spotify has paid more than two billion dollars to labels, publishers and collecting societies for distribution to songwriters and recording artists. (…) When I hear stories about artists and songwriters who say they’ve seen little or no money from streaming and are naturally angry and frustrated, I’m really frustrated too. The music industry is changing – and we’re proud of our part in that change – but lots of problems that have plagued the industry since its inception continue to exist. (…)

Which brings us back to Taylor Swift. She sold more than 1.2 million copies of 1989 in the US in its first week, and that’s awesome. We hope she sells a lot more because she’s an exceptional artist producing great music. In the old days, multiple artists sold multiple millions every year. That just doesn’t happen any more; people’s listening habits have changed – and they’re not going to change back. You can’t look at Spotify in isolation – even though Taylor can pull her music off Spotify (where we license and pay for every song we’ve ever played), her songs are all over services and sites like YouTube and Soundcloud, where people can listen all they want for free. To say nothing of the fans who will just turn back to pirate services like Grooveshark. And sure enough, if you looked at the top spot on The Pirate Bay last week, there was 1989…

Here’s the thing I really want artists to understand: Our interests are totally aligned with yours. Even if you don’t believe that’s our goal, look at our business. Our whole business is to maximize the value of your music. We don’t use music to drive sales of hardware or software. We use music to get people to pay for music. The more we grow, the more we’ll pay you. We’re going to be transparent about it all the way through. And we have a big team of your fellow artists here because if you think we haven’t done well enough, we want to know, and we want to do better. None of that is ever going to change.

We’re getting fans to pay for music again. We’re connecting artists to fans they would never have otherwise found, and we’re paying them for every single listen. We’re not just streaming, we’re mainstreaming now, and that’s good for music makers and music lovers around the world.

On Tuesday, Spotify CEO Daniel Ek finally put his money where his mouth is and released some figures about what Taylor Swift was earning from streaming her songs on Spotify. Ek claimed that before she pulled her tracks, the current queen of pop was projected to earn $6 million a year. Yesterday, Swift’s label boss, Scott Borchetta, fired back in Time Magazine, where he said Spotify had paid a mere $500,000 for Taylor Swift’s domestic streams last year. Spotify replied in the same Time article, saying it had paid Swift $2 million in global streaming royalties over the last 12 months.

$6 million, $500,000, $2 million — how do you reconcile all those numbers? It’s pretty simple actually. All these numbers could be accurate without conflict. Borchetta was looking to cherry-pick the smallest possible figure, so he went with $500,000, which is what Spotify paid for Taylor Swift streams in the US. But that’s only one of its markets, and it’s not even its largest. Globally, Spotify paid swift $2 million over the last year.

How did Ek get to a whopping $6 million? As more people sign up for Spotify and Taylor Swift continues her march towards infinite popularity, the amount she is getting paid is increasing. He took her trend line and ran it forward a year to get to the highest possible number he could quote.”We paid Taylor’s label and publisher roughly half a million dollars in the month before she took her catalog down—without even having 1989 on our service—and that was only going to go up,” Spotify told Time.

There is a much bigger argument going on here about whether or not streaming services are cannibalizing album sales and digital downloads. Will artists be left with pennies on the dollar they once earned? For the rare artist left like Taylor Swift who can move actual honest-to-god compact discs, there may be a boost in sales from keeping new tracks off Spotify. But album sales have been in a downward spiral since well before streaming services arrived, and streaming royalties are the fastest growing source of revenue in the music industry. There are few people who can swim against that current, and it can only last for so long.

(…) I think there should be an inherent value placed on art. I didn’t see that happening, perception-wise, when I put my music on Spotify. Everybody’s complaining about how music sales are shrinking, but nobody’s changing the way they’re doing things. They keep running towards streaming, which is, for the most part, what has been shrinking the numbers of paid album sales.

With Beats Music and Rhapsody you have to pay for a premium package in order to access my albums. And that places a perception of value on what I’ve created. On Spotify, they don’t have any settings, or any kind of qualifications for who gets what music. I think that people should feel that there is a value to what musicians have created, and that’s that. (…)

This is just wrong (and I say that as a HUGE Taylor fan!). What she seems to be saying is that it doesn’t matter who pays what. It matters that every consumer feels like they are paying for her music every time they play it. This seems to be what her defenders are saying, as well.

It seems weird to make a business decision based on a feeling. Particularly since Spotify pays the artist for plays, even on the free version of its service (it’s a very small fee per stream, and even smaller on the free version of the service, but it exists and it is paid for by free service users having to listen to ads). This is basically exactly like radio, albeit with smaller licensing fees. There are a couple of things here:

First, the artist does get paid per listen, so why does it matter if the consumer “feels” like they are paying for the music? (When I pay for Spotify premium, I “feel” like I’m paying for the ads to go away, not for the songs.)

Second, when you buy an album, you’re basically paying $10 for that first listen. Past that, it’s free. The artist doesn’t get extra money from the person who listens to the song 1 million times versus the person who only listens to it 10 times. When I go home to my parents’ house and pick up my old Britney Spears CD and play it for nostalgic reasons, I definitely don’t “feel” like I’m paying for that experience. I (okay, my mom) paid for that CD over a decade ago. That $10 is long gone.

Regardless of what silly things Taylor Swift says publicly, though, there’s a real question about the viability of streaming as a music revenue stream. Can an artist make more selling albums than on streaming? The quick answer, right now and in the past, is probably yes — particularly for huge stars like Taylor Swift.

But streaming is here to stay whether some major artists decide to pull their albums or not. In the current digital climate, it has replaced illegal downloads, not paid album sales. (…)

The music industry is changing. But in a way that’s really great for consumers, and not clearly all that bad for artists like Taylor Swift.

Regardless of what silly things Taylor Swift says publicly, though, there’s a real question about the viability of streaming as a music revenue stream. Can an artist make more selling albums than on streaming? The quick answer, right now and in the past, is probably yes — particularly for huge stars like Taylor Swift.

But streaming is here to stay whether some major artists decide to pull their albums or not. In the current digital climate, it has replaced illegal downloads, not paid album sales. (…)

The music industry is changing. But in a way that’s really great for consumers, and not clearly all that bad for artists like Taylor Swift.